Credit Risk Contributions Under the Vasicek One-Factor Model : A Fast Wavelet Expansion Approximation

To measure the contribution of individual transactions inside the total risk of a credit portfolio is a major issue in financial institutions. Value at Risk Contributions and Expected Shortfall Contributions have become two popular ways of quantifying these risks. However, the usual Monte Carlo approach is known to be a very time consuming method for computing the risk contributions. In this paper, we calculate accurately the Expected Shortfall and we decompose the Value at Risk and the Expected Shortfall into a sum of risk contributions from individual obligors representing the marginal impact on the total portfolio risk. We take the Vasicek one-factor model as the model framework